The Impact of Farm Credit in Pakistan Khandker, Shahidur R. Faruqee, Rashidur R. 2014-05-08T19:38:29Z 2014-05-08T19:38:29Z 2001-08
dc.description.abstract Both formal, and informal loans matter in agriculture. But formal lenders provide much more in production lending, than do informal lenders, often at a higher cost than what they can recover. The Agricultural Development Bank of Pakistan (ADBP), for example, providing about 90 percent of formal loans in rural areas, incurs high costs on loan defaults. Like other governments, the Government of Pakistan subsidized the formal scheme on the grounds that lending to agriculture is a high-risk activity, because of covariate risk. Because farm credit schemes are subsidized, policymakers must know if these schemes are worth supporting. Using recent data from a large household survey from rural Pakistan, the authors estimate the cost-effectiveness of the ADBP loans. To estimate credit's impact, they use a two-stage method, which takes into account the endogeneity of borrowing. Clearly, formal lenders are biased toward larger farmers with collateral. Large landowners, who tend to represent only four percent of rural households, get 42 percent of formal loans. Landless, and subsistence farmers, who represent more than 69 percent of rural households, receive only 23 percent of formal loans. ADBP loans improve household welfare but, although large farmers receive most of ADBP finance, the impact of credit is greater for small farmers than for large farmers. Large landowners use formal loans unproductively. Because the ADBP scheme is subsidized, it is not cost-effective for delivering rural credit. It would be more cost-effective is small farmers were better targeted instead. en
dc.language.iso en_US
dc.publisher World Bank, Washington, DC
dc.relation.ispartofseries Policy Research Working Paper;No. 2653
dc.rights CC BY 3.0 IGO
dc.subject Agricultural development
dc.subject Rural credit
dc.subject Farm capital
dc.subject Creditworthiness
dc.subject Credit-based livelihood programs
dc.subject Risk management
dc.subject Loan defaults
dc.subject Subsidized credits
dc.subject Covariate risks
dc.subject Cost-effectiveness
dc.subject Landless laborers
dc.subject Subsistence farming
dc.subject Collateral
dc.subject access to credit
dc.subject accounting
dc.subject ADB
dc.subject agricultural credit
dc.subject agricultural output
dc.subject agricultural production
dc.subject agriculture
dc.subject asymmetric information
dc.subject benefit analysis
dc.subject borrowing
dc.subject commercial banks
dc.subject consumption increases
dc.subject costs of borrowing
dc.subject credit cost
dc.subject credit demand
dc.subject credit institutions
dc.subject credit market
dc.subject credit markets
dc.subject credit programs
dc.subject credit rationing
dc.subject credit risk
dc.subject credit schemes
dc.subject credit transactions
dc.subject deposit accounts
dc.subject deposits
dc.subject diminishing returns
dc.subject econometric evidence
dc.subject econometric models
dc.subject elasticity
dc.subject entrepreneurship
dc.subject expenditures
dc.subject farm credit
dc.subject financial institutions
dc.subject fish
dc.subject Food Policy Research
dc.subject GDP
dc.subject government intervention
dc.subject gross value
dc.subject income
dc.subject inflation
dc.subject interest income
dc.subject interest rate
dc.subject interest rates
dc.subject labor productivity
dc.subject loan defaults
dc.subject moral hazard
dc.subject net profit
dc.subject net value
dc.subject net worth
dc.subject nominal interest rate
dc.subject opportunity cost
dc.subject producers
dc.subject production costs
dc.subject production increases
dc.subject productivity
dc.subject real rate of interest
dc.subject repayment
dc.subject return on equity
dc.subject rural credit
dc.subject savings
dc.subject transaction costs
dc.subject wealth
dc.subject working capital
dc.title The Impact of Farm Credit in Pakistan en
dspace.entity.type Publication 2011-03-08
okr.doctype Publications & Research :: Policy Research Working Paper
okr.globalpractice Macroeconomics and Fiscal Management
okr.globalpractice Environment and Natural Resources
okr.globalpractice Finance and Markets
okr.identifier.doi 10.1596/1813-9450-2653 WPS2653
okr.language.supported en
okr.region.administrative South Asia Pakistan
okr.topic Environment :: Environmental Economics & Policies
okr.topic Finance and Financial Sector Development :: Banks & Banking Reform
okr.topic Finance and Financial Sector Development :: Financial Intermediation
okr.topic Finance and Financial Sector Development :: Payment Systems & Infrastructure
okr.topic Finance and Financial Sector Development :: Strategic Debt Management
okr.topic Macroeconomics and Economic Growth :: Economic Theory & Research
okr.unit Rural Development, Development Research Group
relation.isAuthorOfPublication 1dc630c1-c19d-5c71-8d7c-1299435d0456
relation.isSeriesOfPublication 26e071dc-b0bf-409c-b982-df2970295c87
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